How Are Total Loss Settlements Figured ?
Most all Total Loss Settlements are based upon the pre-loss actual cash value (ACV) or depreciated value of the vehicle. In order to define a realistic ACV it is necessary to find vehicles comparable to the Total Loss vehicle and see how much they are being sold for. To that amount the insurance company should add sales tax, title and registration fees. However, the ACV of your vehicle could vary dramatically based upon the motivation of the appraiser locating the “Comp” vehicles. Most insurance companies use an independent automated market survey service to locate “Comps” and make a value recommendation for the Total Loss vehicle. As there are more than one such automated services competing for work from various insurance companies, there is an implied incentive to have a service provide lower priced Comps which will save insurance companies money and theoretically encourage an insurance company to use that service again in the future. It is for this reason that more and more consumer
In insurance terms, the expression “Total Loss” simply means the cost of repair + projected supplements + projected diminished resale value + projected Rental Reimbursement expense exceeds the cost of buying the damaged vehicle at its pre-accident value minus the projected proceeds of selling the damaged vehicle for salvage. This is the definition of an “Economic Total Loss”. There is also what is known as a “Constructive Total Loss”. No mathematics required here. If a car drives off a bridge, gets hit by a speeding train and then catches fire, that is a “Constructive Total Loss”. Whether the Total Loss was “Economic” or “Constructive”, most all Total Loss Settlements are based upon the pre-loss ACV or depreciated value of the vehicle as explained in question #2 of this text. In order to define a realistic ACV it is necessary to find vehicles comparable to the Total Loss vehicle and see how much those “Comps” are being sold for. To that amount the insurance company should add sales tax
Related Questions
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